INTERNATIONAL Monetary Fund (IMF) has observed that Covid-19-triggered economic crisis will cause a major spike in fiscal deficits and public det ratios as compared with pre-Covid projections.

It has projected 13.1 % increase in Global debt to 96.4% of GDP in 2020 from an estimated 83.3% of GDP in 2019. The world's general government fiscal overall balance is projected to jump to - 9.9% of GDP in 2020 (deficit) from an estimated -3.7% in 2019 and -3.1% in 2018.

According to IMF's Fiscal Monitor Report (FMR), "As output drops, revenue will fall even more sharply (revenue is projected to be 2.5 percent of global GDP lower in the baseline scenario for 2020 than what was projected in the October 2019 Fiscal Monitor). The necessary health expenditure and the tax and spending measures to support people and firms will also have direct fiscal costs, currently estimated at $3.3 trillion globally. In addition, although public sector loans and equity injections ($1.8 trillion) and guarantees and other contingent liabilities ($2.7 trillion) can support financial and nonfinancial enterprises, they also create fiscal risks".

Keeping in view initiatives taken by different governments, FMR has tentatively concluded that fiscal balances in 2020 are expected to deteriorate in almost all

countries, with sizable estimated expansions in the United States, China, and several European and other Asian economies.

It says: " Although a sizable increase in deficits this year is necessary and appropriate for many countries, the starting position in some cases presents vulnerabilities (global public debt was 83 percent of GDP in 2019). The situation is more concerning for emerging market and developing economies that face multiple shocks that include the pandemic, an abrupt worsening in financing conditions, weak external demand, and (for commodity exporters) lower commodity prices ".

The size of the impact of COVID-19 on public finances is highly uncertain at this time and will depend not only on the duration of the pandemic but also on whether the economic recovery is swift or the crisis casts a long shadow. As public sector support is provided on an extraordinary scale, including vehicles such as loans and guarantees, transparency is crucial to manage fiscal risks. As countries contain the pandemic and shutdowns end, broad-based, coordinated fiscal stimulus—depending on countries' financing constraints—will become a more effective tool to foster the recovery. Exit from the exceptional measures introduced during the crisis will also be appropriate. Once economies recover, achieving progress on ensuring debt sustainability will be needed.

FMR has called for swift and concerted government responses to mitigate the health and economic effects of the coronavirus outbreak. It has pointed out that fiscal policies play a key role in this arena.

The Group of Twenty (G20) economies have already provided sizable fiscal support through revenue and spending measures of 3.5 percent of GDP on average, as of April 8, 2020, in response to the pandemic. This amount is higher than the stimulus during the global financial crisis that began in 2008. In addition, massive packages of public-sector liquidity support, including loans and guarantees, each above 10 percent of GDP in France, Germany, Italy, Japan, and the United Kingdom, were announced to support financial and nonfinancial firms, including small and medium-sized enterprises. At the global level, spending and revenue measures amount to $3.3 trillion and loans, equity injections, and guarantees total $4.5 trillion.